The Fed Chair is expected to tell the House Financial Services Committee at 1000 ET that the central bank remains on a hawkish course of steadily rising rates.

Investors will be closely watching the testimony for any signals on how the bank is viewing a retreat in inflation and muted wage growth.

The U.S. central bank will also issue its Beige Book at 2 p.m. ET (1800 GMT), a compendium of anecdotes on the health of the economy. This will likely provide further evidence on the strength of the economy and give the Fed impetus to raise interest rates.

The Fed's next policy meeting is on July 25-26.

"We look for the markets to be choppy as the latest political saga overhangs and the forecast of the economic outlook remains favorable despite of a tighter monetary policy ahead," said Peter Cardillo, chief market economist at First Standard Financial.

U.S. stocks closed flat on Tuesday after clawing back from a fall as emails suggested Trump Jr. welcomed Russian help against Clinton in the 2016 presidential campaign.

The dollar on Wednesday failed to recover from the damage suffered from Trump's alleged links with Russia and held close to its lowest in more than a year against the euro.

Investors will also be keeping an eye on second-quarter earnings reports on Friday from big U.S. banks including JPMorgan Chase, Wells Fargo and Citigroup.